Does the wholesaler’s assignment fee matter to you if the all-in price works?

Question

It’s one of the oldest debates between cash buyers and wholesalers.

Some investors look strictly at the bottom line: if the total purchase price leaves plenty of room for their target margin or rental yield, they couldn't care less if the assignment fee is $5k or $35k. Their philosophy is simple—a deal is a deal, and what someone else makes on the spread is none of their business.

Other operators take issue with seeing a massive assignment fee on the closing statement, especially if the wholesaler stands to make almost as much on a paper contract as the flipper risking hundreds of thousands in capital, debt service, and contractor headaches for six months.

For those of you actively buying off-market properties right now: do you care what the fee looks like on the settlement statement, or is the net purchase price the only number that matters?

Chris Colton · Answer

As somebody who sits on both sides of this, I'll be honest. When I'm buying, the all in number is what I underwrite. If the deal works at the net price, it works.

Where the fee does matter to me is trust. When a wholesaler is straight with me about their fee and it's on the paper where everyone can see it, I come back to that wholesaler first next time. The deals I walk from aren't the ones with a big fee. They're the ones where the fee feels hidden.

Transparent and reasonable beats small and sneaky every time, at least with the buyers I know.

Travis Goodwin · Answer

I’d focus on whether the deal works for me. Someone making a small fee doesn’t make it a good deal, and someone making a big fee doesn’t make it a bad one. My tip is to run your own comps, verify the repairs, and account for holding and selling costs before agreeing to the price. If there’s enough room for my profit and the risk I’m taking, I’m happy for somebody else to get paid too. Just be upfront about it.

James Jones · Answer

The fee does not matter to me. The all-in number does. I buy BRRRR in Memphis: single-family under $100K total basis, and the wholesaler's fee is just part of that basis. I run two tests on every deal. One, does it clear the 1% rule — all-in cost, fee included, against rent, with Section 8 paying $1,395 to $1,950 on a 3BR+ here. Two, does the ARV land $180K to $265K so the DSCR refi at 70-80% LTV recycles my capital. If both work, I do not care if the fee is $5K or $25K — the wholesaler did the work I did not do. Deal flow is my bottleneck at 236 properties, so I want the wholesalers who bring me deals making money. I just never put earnest money down, fee or no fee.

Cat Rauh · Answer

One angle that doesn't come up much in this debate: if the buyer is financing, the fee matters to the lender even when it doesn't matter to the buyer.

A lot of lenders treat the assignment fee as part of the purchase price, so it's in the cost basis and the loan-to-cost math works fine. But many cap how much of that fee they'll finance, or want it to look reasonable next to the contract price. A $35k fee on a $120k contract gets questions. The buyer may end up covering part of it in cash, which changes their return even if the all-in number looked good on paper.

The other thing is the appraisal. If the all-in price is close to as-is value, a big fee can push the loan request over what the property supports today, and that's when deals stall at the last minute.

So for buyers using leverage, I'd ask the lender early how they handle assignment fees and whether there's a cap. And for wholesalers, putting the fee on the closing statement cleanly and having comps that back up the all-in price makes your deal easier for any lender to say yes to.

I should say I'm a lender myself, so these closing statements cross my desk every week.

Account Closed · Answer

Let's connect! I have been wholesaling full time for 3 years. Happy to help newcomers.

Lauren Cutchen · Answer

If the all-in number works and the comps back it up, most investors I work with care more about the final basis than how the fee is labeled. Transparency still matters though. Surprise fees kill deals.

Jamie Parker · Answer

As new buyer, I think about the deal very cautiously. Mainly because at this time I am still building my reputation as an operator. While I have closed a +30k and for $200 on a wholesale deal. Every buyer has say the same thing, "If the numbers work for me then i dont care what you make". For now it matters not because "wholesalers should make x", it matters now because Im new to the game and still working out my understanding of the numbers.

Many of the deals I have seen, simply dont work. But It may be my exit strategy or cost to do business. So I have not purchased from a wholesaler yet as a buyer. I have purchased off the MLS, which is not much different. But the numbers worked. As i get my systems better, I will be glad to be a solid buyer for a wholesaler.

Ryan Brown · Answer

@Alejandro Lopez, I've worked several deals with wholesalers. I'll admit that seeing the fee on the closing statement can sting a little sometimes. But it doesn't change how I feel about the deal. If the price still works for me, whatever they earned by finding it is good for them.

They did work I didn't do. They spent the marketing money, made the calls, sent the mailers, took all the no's and found a motivated seller who was ready to make a deal. That's not easy, and it's worth paying for. My job is to know my numbers. If the all-in price gets me the margin or the return I need, the deal is a deal whether their fee is $5K or $35K. If it doesn't, I pass, and the fee doesn't matter then either.

Getting hung up on what the wholesaler makes is how you talk yourself out of good deals, and it's a quick way to make sure the next good one goes to another buyer. I'd rather be the buyer who closes cleanly and gets the first call next time.

Cat's point about financing is a good one, though. If you're using a lender, find out early how they handle the fee so it doesn't surprise you at closing.

Does the wholesaler’s assignment fee matter to you if the all-in price works?

Does the wholesaler’s assignment fee matter to you if the all-in price works?

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